Can't afford monthly card payment? Try these options

Dear Credit Smart,I have a $20,000 credit card debt. My
monthly payments are almost $600 per month. It is getting very expensive and
difficult to pay. Is there any advice you could give me to lower my debt? I'm
overwhelmed by how much I owe and don't know what to do. – Lou

Dear Lou,I do understand how a monthly obligation of $600 a month is
fairly overwhelming. I checked out the CreditCards.com credit card payoff
calculator to see what that would tell me about your debt. I don’t know what your interest
rate is, but based on your monthly payment I guessed around 20 percent.
Assuming no new charges, the calculator said it would take you about four years
to pay off the debt if you continue to pay $600 every month.

The options to handle your debt are to continue to pay on
your own (can you take on extra work or sell something of value?), to borrow from
a bank or credit union, to borrow from your 401(k) (if you have one) or against
the equity in your home, enroll in a debt management plan, negotiate a
settlement with your credit card company, or file for bankruptcy. You could
also transfer some or all of the debt to a 0 percent APR balance transfer card,
but there is typically a 3 percent fee and the 0 percent deal only lasts for a
limited time. Of those options, only debt settlement or bankruptcy offers the
possibility of actually reducing your debt, but both will seriously affect your
credit score in a negative way. As for debt settlement, you will also face tax
consequences for any amount that is forgiven.

If you decide you want to try debt settlement, I would
certainly advise you to consider negotiating directly with your creditor and
not work with a third party debt settlement company. These types of programs usually offer lower
monthly payments, but those payments are kept by the company until they have
enough to actually offer a settlement. This means that even though you are
making monthly payments, your creditor is not being paid, further ruining your
credit score.

Bankruptcy exists in this country for good reasons, but
should be carefully considered as this is usually a last resort. If you feel
that bankruptcy is your best option, you will have to consult an attorney.

Instead of lowering your debt, you might consider an option
that could lower your interest rate and possibly your monthly payment. This
option is a debt management plan, which is offered by not-for-profit credit
counselors like those associated with my company, the National Foundation for Credit Counseling. On a debt management plan, your
account will be closed to further charges, but you will continue to make
monthly payments to your creditor.

Debt managment plans are designed to get you out of debt in five years or less. This does mean
that you might be on the plan longer than if you continue on your own, but a
lower monthly payment might give you the breathing room you need to not feel so
overwhelmed by your debt.

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